Hi I have generate equity of my strategies which invest in commodities and currencies at daily interval. What the best method to combine together all strategies in one portfolio? I want to make the highest Sharpe Ratio ass possible.


  • $\begingroup$ Do you want to combine or optimise and can you share the type of instruments you intend to be using? If you do optimise, are you interested in optimising allocation between strategies or individual positions? $\endgroup$ – RndmSymbl Nov 2 '14 at 18:44
  • $\begingroup$ I dont want to optimize beacue it will be data snooping bias. Types of instruments are not important. You have only daily equity and you have to pick the best strategy in for example monthly interval $\endgroup$ – JakubM Nov 2 '14 at 19:37
  • $\begingroup$ I believe you are asking: "On a monthly rebalancing schedule how do I choose one of two possible portfolio allocation strategies?" That is a broad question and you may want to focus and clarify the question further. $\endgroup$ – RndmSymbl Nov 2 '14 at 20:11
  • $\begingroup$ I guess it depends how sophisticated you want to get. Equal weight is or equal risk is pretty simple. Optimizing multivariate empirical distributions is harder. Meucci's book might have something to say on this, though I admit I haven't gotten around to reading it yet. $\endgroup$ – experquisite Dec 8 '14 at 6:40

Well, thats not an easy task. Because you can't predict the movement of the market.

But if you want to do it based in historical data, you only have to apply the Modern Portfolio Theory by applying a Markowitz Model, which maximices the Sharpe Ratio. I have done it with Excel, is not hard but you need to know the steps, there are many tutorials, just google it.

Hope this works.

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  • $\begingroup$ Are you sure Markowitz is the right way to go given that instruments and return distributions are unknown? $\endgroup$ – RndmSymbl Nov 2 '14 at 19:01
  • $\begingroup$ In my opinion, it is the easiest way. But in the other hand, it must be taken into account that some commodities are cyclical...So depending on the stage of the cycle you should consider it. It must also be mentioned, that Markowitz is a very powerful tool, but you cannot use it if you don't know what you are doing, like in every other method in Finance. What I usually do is a core-satellite strategy, so I use X% in passive (tracking an index) and (x-100)% in active management (Markowitz), so I minimize my losses by diversifying not only assets but method. $\endgroup$ – arodrisa Nov 2 '14 at 19:26

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